Thinking outside of the box – blanket
mortgages
When someone calls me up out of the blue for a mortgage , I
often ask them, “Why did you call me?”
Often the reply is
that a family member suggested it. I then ask, “Do you know what I do?”
Once again , I will
get a reply that they aren’t sure. I
will then explain to them that while banks do mortgages, they don’t specialize
in them. They also do deposits, GIC’s, RRSP’s , insurance ,car loans etc.
I only do mortgages,
day after day. As I result I have more experience in unusual situations and we
are getting more of them all the time. Sometimes you need to think outside of
the box.
Here’s an
example, Sally and Ted want to buy a
home but they don’t have a down payment.
A recent HSBC Bank study found that 37% of young Canadians count on the Bank of
Mom and Dad for their down payment.
Unfortunately in many cases, Mom and Dad would like to help
them out but they don’t have the cash.
They own their home or have a low mortgage balance but their
savings are tied up . This is where
thinking outside of the box comes in handy. A blanket mortgage is a mortgage that covers
the subject property and another property that has sufficient equity in it to
carry both properties.
If the parents are
willing, a mortgage can put placed on
the parents ‘ home and the new home. If the property value for the 2 homes is
more than 80% of the mortgage amount the new home can be purchased without the
young couple having to save a down payment and pay expensive CMHC fees.
What risks or
down sides are there to this idea.? If
Mom and Dad want to sell their home and move to Arizona the children will have
to get a new mortgage to cover their home .There may be penalties for breaking
the mortgage which will have to be paid.
There’s also the risk that the children may fall behind on their
mortgage due to layoffs or maternity
leaves and that could jeopardize the parent’s home.
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